Public infrastructure has remained largely dominated by the government’s footprint. Public Sector Enterprises (PSEs) were created to cater to the needs of community service obligations and sometimes sectors where large investments were required. PSEs have played a pivotal role in bridging the gap of private sector investment in strategic sectors of the economy namely transport, communication, public utilities including energy, heavy industries, banking & finance and food & agriculture.

However, it has now been realised widely that PSEs have created market distortions, suppressed entrepreneurship and innovation culture and exerted fiscal pressure on the public exchequer. Service delivery of PSEs has deteriorated due to multiple factors and they tend to underperform compared to their private sector counterparts. In several countries, government ownership has resulted in lowering productivity, distorting competition and poor service delivery. A number of countries responded by reforming or privatising PSEs, but they still continue to play a significant role in developing economies, including Pakistan.

Performance of a number of PSEs operating in infrastructural areas has deteriorated over time. Functioning of PSEs in Pakistan has affected not only the economy in terms of hemorrhaging public exchequer, but impaired lives of people on a daily basis, be it electricity and gas in the house or a train ride. Considering the need for reform of PSEs, Government of Pakistan has initiated restructuring of PSEs including Pakistan Railways and Power Sector.

Key objectives of the restructuring process include (i)  “improve overall corporate governance of PSEs; (ii) curtail hemorrhaging; (iii) improve service delivery; (iv) reduce fiscal burden on the exchequer and (v) move to a structural surplus and increased public sector savings. Key aspects of restructuring model are as follows; (i) restructure Boards of Directors (BODs) of PSEs by inducting a mix of skills including academia, management experts, professional managers and technocrats; (ii)  induct professional management including CEOs, CFOs and key mangers; (iii)  develop viable turn around plans; (iv)  ensure implementation of plans in an independent manner with the support of government under the mandate of Cabinet Committee of Restructuring (CCOR) and; (v) ensure monitoring by CCOR” (Finance Division n.d.) Substantial progress has been achieved in this regard (Ibid.).

Quality of infrastructure both in terms of physical adequacy and service delivery has retarded growth and widened trust deficit between state and people. Going forward, there is a need to build consensus on future of PSEs in Pakistan. There is an urgent need to encourage private investments in key sectors including power and railways. In order to spur growth in Pakistan, a medium to long term vision needs to be pursued for financial viability, regulatory oversight and service delivery in these sectors.

Reference:

Finance Division n.d., ‘Year Book 2010-2011’, Government of Pakistan,

< http://www.finance.gov.pk/publications/YearBook2010_11.pdf> accessed 29 Nov. 2012.